MaximoWorld

Reliability
and
Operational Excellence

A Common Sense Strategy for

Business Excellence

August 2019

The RM Group, Inc.

Knoxville, TN 1 Copyright
Copyright2017
2012
 Ron Moore

• Author of 1) Making Common Sense Common Practice; 2) What Tool?

When? A Management Guide; 3) Where Do We Start Our Improvement
Program?; 4) Business Fables & Foibles; 5) A Common Sense Approach
to Defect Elimination; 6) Our Transplant Journey; and 70+ papers
• Authority on strategies and practices for operational excellence
• Clients in North & South America, Europe, Africa, Asia, Australia
• Managing Partner of The RM Group, Inc. for 25 years
• Prior to consulting - President of Computational Systems, Inc. (CSI)
• BSME, MSME, MBA, PE, CMRP
The RM Group, Inc.
Knoxville, TN Copyright 2012
 MaximoWorld

Contents
® Business Overview – Value of Reliability Culture
® Safety – fewer injuries, incidents
® Customer Satisfaction – on-time, in-full, high quality
® Lower costs, higher capacity - higher profit
® Essential to Operational/Manufacturing Success
® The Reliability Process (Production led, not maintenance)
® Leadership, Alignment, Managing Cultural
Change, Performance Measurement Principles
® Implementation (Executive Sponsorship, Production –
Maintenance Partnership, Employee Engagement)

The RM Group, Inc.

Knoxville, TN 3 Copyright
Copyright2017
2012
 MaximoWorld

Value (Approximate)
® ~10%+ lower maintenance costs
® ~10% more capacity (for growth)
® Lower Capital Costs (using existing capacity)
® Improved safety, lower risk (see the data)
® Better on-time, in-full delivery
® Lower energy costs

The RM Group, Inc.

Knoxville, TN 4 Copyright
Copyright2017
2012
 MaximoWorld
Capitalism is very Darwinian

Every morning in Africa a gazelle wakes up,

knowing that it must run faster than the
fastest lion, or be eaten
The same morning a lion wakes up, knowing
it must run faster than the slowest gazelle, or
starve to death
Whether you’re a lion or gazelle, you’d better
be prepared to run as fast as possible
African Proverb
The RM Group, Inc.
Knoxville, TN 5 Copyright
Copyright2017
2012
 MaximoWorld

Your system is perfectly designed

to give you the results
that you get.
W. Edwards Deming

The RM Group, Inc.

Knoxville, TN 6 Copyright
Copyright2017
2012
 MaximoWorld
World Class Business
Excellence in and Alignment of:

Marketing

$ Research
Operations &
Development

The RM Group, Inc.

Knoxville, TN 7 Copyright 2012
 MaximoWorld

Market Survivor Profile

(Prices trend down over time. We create a future by driving unit costs
down, through continuous Improvement, or “little” innovation)

Market Price

“Big” Innovation-
Your Future

Profit = (Price – Cost) x Volume

C
“Little” Innovation
Drives costs down

A B
Unit Cost =
Cost
Capacity
Market Share
The RM Group, Inc.
Knoxville, TN 8 Copyright 2012
 MaximoWorld
Cost Management is not the
same as cost cutting
® Costs are a consequence of your
practices and processes
® Cost management focuses on improving
those, so that costs come down naturally
® Cost cutting is typically not sustainable,
but may be necessary in some situations

The RM Group, Inc.

Knoxville, TN 9 Copyright
Copyright2017
2012
 MaximoWorld
Cost Management (cont.)
® Cost cutting is a poor bet for prosperity. When
does it work?
® If you’re a “C”, and have no choice to survive
® If you’re a bloated bureaucracy, and must
® If you’re faced with reluctance in employees, unions,
etc.; and/or need to get people’s attention
® In specifically targeted situations- obvious waste
® In a major market shift, disruption, or downturn, e.g.,
10-20%
® Much more likely to work when combined with
restructuring of physical assets (Morris, et.al.)
The RM Group, Inc.
Knoxville, TN 10 Copyright
Copyright2017
2012
 MaximoWorld
Cost Management (cont.)
® Suppose our efforts to improve succeed, how do
we manage the need for fewer people?
® Attrition: don’t replace those who leave through
retirement, resignations, terminations
® Reduced contract labor (be loyal to our employees)
® Reduced overtime
® Voluntary reduction; conversion to part-time labor
® Re-assignment to process improvement efforts
® Expanded business volume, with the same number
of employees; and assignment to new jobs!
® Many of these require flexibility, and training!
The RM Group, Inc.
Knoxville, TN 11 Copyright
Copyright2017
2012
 MaximoWorld
Cost Management –
DuPont Case Study
“Maintenance’s contribution to Uptime (Asset
Utilization) is worth 10 times the potential for cost
reduction.”

“Through our push for Uptime, we want to increase

our capital productivity 10%... We value this
improvement (at) US$ 4.0 billion in capital projects
(not required)...”
“You can’t cost cut your way to prosperity!”
Vince Flynn, DuPont
Corporate Maintenance Leadership Team
The RM Group, Inc.
Knoxville, TN 12 Copyright
Copyright2017
2012
 MaximoWorld
Asset Utilization/OEE
What do we do? Begin by measuring all losses from
ideal- Asset Utilization (AU) or Overall Equipment
Effectiveness (OEE) - If you could run your plant
8,760 hours per year, making 100% first-pass, first-
quality product, at 100% of your maximum
demonstrated, sustainable rate, with no losses for
changeovers:
How much could you make?
How much are you making?
Where are your losses from ideal?
Most importantly,
Are these losses acceptable to the business?
The RM Group, Inc.
Knoxville, TN 13 Copyright 2012
100%
AU/OEE & Loss Accounting- Manage Losses!
Scheduled Downtime Ideal
(minimize through better PM, PdM, planning)

Unscheduled Downtime
Maximum Sustainable Rate

“Heaven”
(minimize through better operating practices, defect elimination, PM, PdM)

Process Rate Losses

(minimize through better process control, consistency, standards)

Quality Losses

Potential Rate Utilization

(minimize through better standards, control, conformance)

Changeover/Transition Losses
(minimize through quicker changeovers, better production planning)

No Demand/Market Losses

Quality Utilization

Actual Availability
Asset Effectiveness
(lower costs, better alignment- marketing and operations)

Asset Utilization
AU and OEE measure capital efficiency-

OEE/
WhyActual
spend moreProduction
capital? Find your hidden plant!
We must understand all losses from ideal and
make business decisions to reduce them

The RM Group, Inc.

Knoxville, TN 14 Copyright 2012
 MaximoWorld

Reliability –
Essential for Lean Manufacturing
Basis for Six Sigma

The RM Group, Inc.

Knoxville, TN 15 Copyright
Copyright2017
2012
 MaximoWorld
The Toyota Production System
(Lean Manufacturing)

High Quality, Low Cost, On Time Delivery

Excellence in Safety – High Morale

Just-in-Time
Right part, right
In-station quality
People and Teamwork
Make Problems Visible
amount, right time
Automatic stops/Andon
Takt time planning
Continuous Improvement Person-machine separation
Continuous flow
Error proofing
Pull system
In-station quality control
Quick changeover Waste Reduction
Problems - 5 Why’s
Integrated logistics

Level Production Flow

Stable, Standardized Processes, including Equipment Reliability
The Toyota Way Philosophy
Source: The Toyota Way by Jeffrey Liker, McGraw-Hill, New York, NY, 2004.
The RM Group, Inc.
Knoxville, TN 16 Copyright 2012
 MaximoWorld
Reliability- Foundation of Lean Manufacturing-
reduces variability, delay times, & inventory
(High variability and delay times necessitate more inventory and buffer stocks)

Production Flow Demand Flow

Delay Delay Delay

A Times
B Times
C Times
D

Raw
Mat’l
WIP* WIP WIP Product

100 100 100 100

90 90 90 90
80 80 80 80
70 70 70 70
60 60 60 60
50 50 50 50
40 40 40 40
30 30 30 30
20 20 20 20
10 10 10 10
0 6 12 18 24 30 36 42 48 54 60 66 72 78 84 90 0 6 12 18 24 30 36 42 48 54 60 66 72 78 84 90 0 6 12 18 24 30 36 42 48 54 60 66 72 78 84 90 0 6 12 18 24 30 36 42 48 54 60 66 72 78 84 90

*Work In Process Daily Quality Production Levels

The RM Group, Inc.
Knoxville, TN 17 Copyright 2012
 MaximoWorld Six Sigma Focus- Minimize Variability
Performance Levels
Perfect
Processes

Standardize
Procedures
i o n
Vi s
he You shouldn’t attempt to do
Fix the obvious; T statistically driven improvements
until you have a stable process.
Do the basics well W. Edwards Deming

1S 2S 3S 4S 5S 6S
(% “Perfect”: 30.9% 69.2% 93.3% 99.4% 99.98% 99.9997%)

Source: David Burns, Melbourne, Australia

Typical Plant Performance Competitive Advantage

The RM Group, Inc.

Knoxville, TN 18 Copyright 2012
 MaximoWorld Long Term Thinking

What Tool? Process Mapping

The Toyota Way
Employees

When? Tools

Nominal Improvement Hierarchy

Organizational Enablers
& Readiness
(95% of workers) Kaizen – 5S, Standard Work, “Go and See”, 5 Whys,
Quick Changeover, Visual Workplace, Kaizen “Events”

Supply
TPM Principles Chain
Measure OEE and Manage Losses from Ideal
TLC/Operator Care/Consistency
Performance
Effective PM/PdM and Planning
Restore Equipment to Like New/Better
Training and Continuous Learning
Maintenance Prevention, in the Design

Six Sigma RCM

5% of workers
RCA
The RM Group, Inc.
Knoxville, TN 19 Copyright 2012
 MaximoWorld
Benchmarking

Beginning the process of change:

Benchmarking -- “seeking out another

organization that does a process better than
yours and learning from them, adapting and
improving your own process.....”
Dr. Jack Grayson
NCMS Newsletter 11/91
Don’t forget to do internal benchmarking

The RM Group, Inc.

Knoxville, TN 20 Copyright 2012
 MaximoWorld Benchmarks - World Class
Key Performances Indicators
(You must understand the processes for achieving benchmark performance;
don’t use any one measure to make any decisions)

Manufacturing: Maintenance:
OEE/Asset Utilization 85/95% Mtce Costs, % ARV* <1-3%
On-time Deliveries 99%+ Unplanned Downtime Loss <1-2%
Customer Complaints 0.01% Planned Maintenance >90%
Process Quality - Cpk >2 Reactive Maintenance <10%
OSHA Injuries per 200k hrs $ARV per Mtce Tech >$6-8M
Recordables <0.5 % Maintenance Rework < 1%
Lost Time <0.05
Stores:
Human Resources: Parts Stock out Rate < 1%
Overtime <5% Parts Inventory Turns >2
Skills Training ($/yr) $2-3K Value as a % of ARV <0.5%
(Hrs/yr) >40 *ARV= Plant Asset Replacement Value

How does your plant compare to these?

The RM Group, Inc.
Knoxville, TN 21 Copyright 2012
 MaximoWorld

Aligning the Marketing and

Manufacturing Strategies

The RM Group, Inc.

Knoxville, TN 22 Copyright
Copyright2017
2012
 MaximoWorld

A Model for Improvement

® Determine unit cost of production required for
market leadership (among other factors)
® Determine AU/OEE required for this unit cost
® Determine any additional fixed or variable cost
reduction required
® Determine the key next steps for achieving this
AU/OEE and cost improvement, including
timing of the improvement

The RM Group, Inc.

Knoxville, TN 23 Copyright
Copyright2017
2012
 MaximoWorld
Aligning the Marketing and
Manufacturing Strategies (cont)
® What wins orders? Typically:
® Price/Value (Our costs must provide a profit at
market price)
® Quality(go/no go)
® On Time Delivery
® Packaging
® Technical Support

® How do you support winning orders?

The RM Group, Inc.
Knoxville, TN 24 Copyright
Copyright2017
2012
 MaximoWorld
Create a Virtuous Triangle

Marketing
Increase Capacity, Market Share,
Strategy Manage Mix/Complexity
& Gross Profits, esp. in New Markets

Operating Manufacturing
Plan Strategy

Improve Reliability; Reduce Variability

The RM Group, Inc.

Knoxville, TN 25 Copyright
Copyright2017
2012
 MaximoWorld

Relationship
between
Reliability and Safety
(and Costs and Environmental Incidents)

The RM Group, Inc.

Knoxville, TN 26 Copyright 2012
 MaximoWorld BP Texas City, 23 March 2005,
Was Celebrating a Safety Award
the Day of the Disaster! 15 People Died!

The RM Group, Inc.

Knoxville, TN 27 Copyright
Copyright2017
2012
 MaximoWorld BP’s Deepwater Horizon, 22 April 2010
Two VP’s were aboard the platform that morning,
Presenting a Safety Award! 11 people died!

The RM Group, Inc.

Knoxville, TN 28 Copyright 2012
 MaximoWorld

Imperial Chemicals Inc. (ICI)

Had very good safety performance.
And Went Out of Business!

What did they all have in common?

Poor reliability, and
a lack of operational discipline

Let’s look at the data

The RM Group, Inc.
Knoxville, TN 29 Copyright
Copyright2017
2012
 MaximoWorld
Injury Rate v. AU/OEE
over Time - Company A
120
Injury Rate- % of Base

Injury Rate
R = 0.80

OEE/AU- % of Base
135 OEE/AU R2 = 0.64
115
115
110
95
105
75
55 100

35 95

15 90
1
5
9
13
17
21
25
28
33
37
41
45
48
53
Month
Source: Large Industrial Manufacturer-A
The RM Group, Inc.
Knoxville, TN 30 Copyright 2012
 MaximoWorld
Correlation of Corrective & Reactive Work
Orders with Injury Rate – Plant No. 1
400
Total Injuries per Year

350 R = 0.827
2
R = 0.684
300

250

200

150

100
6000 8000 10000 12000 14000
Corrective & Reactive Work Orders per Year

Source: Large Chemical Plant - A

The RM Group, Inc.
Knoxville, TN 31 Copyright 2012
 MaximoWorld
Correlation of PM & PdM Work Orders
with Injury Rate – Plant No. 1
400
Total Injuries per Year

R = 0.955
2
R = 0.911
350

300

250

200

150

100
4000 6000 8000 10000 12000 14000
PM & PdM Work Orders per Year

Source: Large Chemical Plant - A

The RM Group, Inc.
Knoxville, TN 32 Copyright 2012
 MaximoWorld
The More Disciplined Your Maintenance,
the Fewer Injuries you have
(normalised to a base number)

5
R = 0.95
R2 = 0.90
4

2
Injury Rate

0
60 70 80 90 100
Maintenance Schedule Compliance

Source: Large Industrial Manufacturer- B

The RM Group, Inc.
Knoxville, TN 33 Copyright 2012
 MaximoWorld
And, is More Productive
AU/OEE vs. Reactive Maintenance
100
Asset Utilisation (AU) or OEE

90 Slope= -0.24
80

70

60

50

40
10 20 30 40 50 60 70 80 90 100

Source: Data from 180 Mfg Plants

Reactive Maintenance %
The RM Group, Inc.
Knoxville, TN 34 Copyright 2012
 MaximoWorld
Total Recordable Injury Rate vs.
Injury Rate – TRIR Reactive Maintenance

Reactive Mtce Levels,

Best 25%, Middle 50%, Worst 25%
(Emergency + Unplanned, Avg of Four Quartiles)
Source: K. Blache, Reliability and Maintainability
The RM Group, Inc.
Center, University of TN, 2019
Knoxville, TN Copyright 2012
 MaximoWorld
Maintenance Costs vs. Reactive Mtce,
Review of 140 Companies w/3,000 Facilities

Mtce Costs vs. Reactive Mtce

14
% Asset Replacement Value

12
Maintenance Costs,

10
8
6
4
2
0
0 20 40 60
60 80
80

Reactive Mtce Levels, %

(Emergency + Unplanned, Avg of Four Quartiles)

Source: K. Blache, Reliability and Maintainability

The RM Group, Inc.
Center, University of TN, 2018
Knoxville, TN Copyright 2012
 MaximoWorld
And, is More Cost Effective -
Reliability Index v. Production Unit Costs
Production Costs $/Unit

120 R = 0.632
Closed R2 = 0.40
110
100
90
80
70
60
50
30 40 50 60 70 80 90
Reliability Index
Source: Large Industrial Manufacturer-B
The RM Group, Inc.
Knoxville, TN 37 Copyright 2012
 MaximoWorld
Further:
® DuPont reported that the most likely person to
be injured is:*
® a maintenance technician,
® with less than two years experience,
® doing reactive work
® Exxon-Mobil Chemical Co. reported that
accidents are > 5 times more likely during
abnormal operation (emergency work,
startup/shutdown) than when doing planned
and scheduled work**
® In 66% of companies, >60% of injuries occur
while doing reactive maintenance***
Sources: *Andrew Fraser, Reliable Manufacturing, Ltd.
**Scott Ostrowski and Kelly Keim, Exxon Mobil
The RM Group, Inc. *** Christer Idhammar, Idcon, Raleigh, NC
Knoxville, TN 38 Copyright
Copyright2017
2012
 MaximoWorld Defects (Failure Modes) Affect Reliability
1 Every major incident
major (large production loss, lost time accident, etc)
incident implies thousands of defects

For a plant with

6,500 repair work orders/year,
10 losses 10,000 defects (failure modes)
must be eliminated to reduce
the incident rate by 50%

6,500 repair work orders

Source: Winston Ledet,
The Manufacturing Game;
Ledet Enterprises, Inc., Humble, TX

20,000 defects (failure modes)

The RM Group, Inc.

Knoxville, TN 39 Copyright 2012
 MaximoWorld
Safety and Reliability – A
Question of Leadership
® The Safety Manager cannot make the plant
safe. They can support it with tools, training,
facilitation, measures, etc.
Safety is everyone’s responsibility.
® The Reliability Manager cannot make the
plant reliable. They can support it with tools,
training, facilitation, measures, etc.
Reliability is everyone’s responsibility.

The RM Group, Inc.

Knoxville, TN 40 Copyright
Copyright2017
2012
 MaximoWorld

“…the three are indivisible - a

safe site, is a reliable site, is a
cost efficient site!”
Colin MacLean, GM, BP Grangemouth Refinery
after 10,000,000 hours without a lost time accident
(= 1,000 people for 5 years without a LTA)

The RM Group, Inc.

Knoxville, TN 41 Copyright
Copyright2017
2012
 MaximoWorld
Establish a policy linking
Reliability and Safety
® If safe behavior is a requirement, for which you
have specific standards, then…
® Best practice and operational excellence are
requirements, and you have specific standards for
production and maintenance!
® If you believe in Zero Incidents/Injuries, you must
believe in Zero Failures/Unplanned Downtime –
Failures induce greater risk of injury
® Given this, operations & maintenance training
should be on a par with safety training
® Getting both reliability and safety requires
Operational Discipline –
Tenacious use of Best Practices in ALL areas
The RM Group, Inc.
Knoxville, TN 42 Copyright
Copyright2017
2012
 MaximoWorld
A Caution
® Personal safety & process safety are not the same
® You can have excellent personal safety and still:
® Go out of business (a major chemical company)
® Have a major accident (a major oil refining company)
® Personal safety is improved by disciplined use of
PPE, lock out/ tag out, personal behavior, and
disciplined practices
® Process safety is improved by disciplined design,
operating and maintenance practices
® Getting both personal and process safety requires
Operational Discipline –
Tenacious use of Best Practices in ALL areas
The RM Group, Inc.
Knoxville, TN 43 Copyright
Copyright2017
2012
 MaximoWorld
Poor Operational Discipline
Results in Major Accidents

Major Every major accident results in fatalities

accident and major plant damage. It also implies
hundreds of process safety errors

Loss of containment -
potential for many injuries;
plant damage

Process safety breach: loss of -

layer of protection, mechanical integrity,
or shutdown system; exceeding critical limits
Source: Andrew Hopkins in
Failure to Learn; CCH Australia,
Melbourne, Australia

Minor process errors - exceeding safe operating limits;

ignoring alarms; missed critical inspections; faulty designs

The RM Group, Inc.

Knoxville, TN 44 Copyright 2012
 MaximoWorld Defects & Process Errors Reduce
Reliability and Increase Hazards

Traditional Major Major Process

Reliability Incident Accident Safety
Pyramid Pyramid
(W. Ledet) 10 losses Loss of (A. Hopkins)
Containment

6,500 repair work orders Process Safety Breach

20,000 defects Numerous Minor Process Errors

Operational Discipline is essential to eliminate defects and process errors

The RM Group, Inc.

Knoxville, TN 45 Copyright
Copyright 2015
2012
 MaximoWorld
Another caution- focusing on Safety/Safe Practices will
improve safety, but only to a point. You must also
reduce the exposure to the risk of injury, the defects

Initiative
Safety
2

1.8
Lost Time Accident Rate

1.6

1.4

1.2

0.8

0.6

0.4

0.2

0
Yr 1 Yr 2 Yr 3 Yr 4 Yr 5 Yr 6 Yr 7 Yr 8 Yr 9 Yr 10

Annual Injury Rate per 200K Hours (Co. X)

The RM Group, Inc.
Knoxville, TN Copyright 2012
 Another way of considering reliability
Big Bad
and safety is the Swiss cheese model Things
Happen

Maintain

Operate
Defects or
System “Holes”
Install & s s
Startup
c e
r o
Store P
iil ty
a b
li
Small Buy
Initiating
Events
R e
Design
h e
T
The RM Group, Inc.
Knoxville, TN 47 Copyright 2012
 MaximoWorld
Establish a Policy Linking
Reliability and Safety
® All injuries, and failures, are preventable
® No task is so urgent that it cannot be done safely, and reliably
® Management must provide a safe, and reliable workplace
® We are each responsible for preventing injuries, and failures
® Everyone is empowered to stop unsafe, & unreliable, behavior
A reliable plant is a safe and cost effective plant!
Reliability requires a comprehensive approach to
address ALL sources of defects! More on that later.

The RM Group, Inc.

Knoxville, TN 48 Copyright 2012
 MaximoWorld
Drive Reliability with the same
actions that Drive Safety
® Top-down leadership – clear consistent expectations
® Bottom-up ownership and employee engagement
® Education and training If you truly believe in Safety,
® Action plans and measures then Reliability is a MUST to
® Visual Communication minimize the risk of injuries,
costs, & environmental issues!
® Standards and procedures
® Benchmarking and aggressive goals
® Audits and assessments
® Root cause focus – eliminate repeat failures
® Rewards (& willingness to challenge non-compliance)
® Resources for supporting improvement
® Continuous improvement expectation and process
® A culture – a way of life
The RM Group, Inc.
Knoxville, TN 49 Copyright
Copyright2017
2012
 MaximoWorld

The Reliability Process

For Operational Excellence

A Commitment to Safety Requires

a Co-Commitment to Reliability
and Related Policies and Practices

(Should be given comparable executive attention as

any high-powered consulting recommendations)

The RM Group, Inc.

Knoxville, TN 50 Copyright
Copyright2017
2012
 MaximoWorld The Reliability Process
For Operational Excellence You can’t maintain your
way to reliability

Install/
Design Buy Store Operate Maintain
Startup
(Life Cycle Cost) (With Discipline) (With Care)
(Cost of Ownership) (“Like a Store”) (With Precision)
Defects Defects Defects Defects Defects Defects

(note where most defects occur)

Root Causes
Rate Losses & Downtime
Unneeded Work - $$
Source: In Cooperation with
Injuries (& Env. Events)
Andrew Fraser,
Reliable Manufacturing Ltd. Asset Utilization Minimum unit cost
& of Production
Necessary Work
The RM Group, Inc.
Knoxville, TN 51 Copyright
Copyright 2015
2012
 MaximoWorld

DESIGN -
For Reliability, Operability,
Availability, and Maintainability

The RM Group, Inc.

Knoxville, TN 52 Copyright 2012
 MaximoWorld
Minimum Adequate Design (MAD)
Some companies use minimum adequate
design. Focus tends to be on budgets and
schedules, often resulting in:
• Shorter equipment life
• Higher operating and maintenance costs
• Lower production capacity
• Poorer business performance

According to SMRP, 86% of companies do

NOT use “life cycle cost” for capital projects
The RM Group, Inc.
Knoxville, TN 53 Copyright 2012
 MaximoWorld

Phases of Life-Cycle Cost Commitment

Life-Cycle Cost Committed

95%1 97%1
100
85%1 85%2

Construction/Startup
75 65%2

Maintenance
Production &
66%1

Final Design
50%2

Preliminary
50
30%2

Design
Planning

25

0
Life Cycle Phases
Sources: 1) Ben Blanchard, Design and Manage to
Life Cycle Cost, MA Press, Forest Grove, OR, 1978;
2) John Schultz, Allied Reliability, Charleston, SC

The RM Group, Inc.

Knoxville, TN 54 Copyright 2012
 MaximoWorld
Life Cycle Cost and Cash Flow Considerations

Life Cycle
Cost Policy
Cash ROI
Flow
($)
Lowest installed
Cost Policy

(~1 est
)
0%
Inv

Time

Minimum Life Cycle Costs =>

Maximum Long Term Profits

The RM Group, Inc.

Knoxville, TN 55 Copyright 2012
 MaximoWorld

BUY/PURCHASE-
For Reliability using
Strategic Alliances,
Good Specifications & Standards, and
Focus on Total Cost of Ownership

The RM Group, Inc.

Knoxville, TN 56 Copyright 2012
 MaximoWorld

Total Cost of Ownership

® Total Cost of Ownership- costs include:
® Price
® Drawings, bill of material, manuals, etc.
® Selection effort, including company staff, travel, etc.
® Procurement transaction, freight, duties
® Delivery, assembly, installation, startup
® Performance capability, efficiency, operability
® Maintenance/PM requirements, maintainability
® Parts stocking, inventory, warranty
® Service levels (or lack thereof)
® Other costs…
® Only ~25% of total cost of ownership is price!
The RM Group, Inc.
Knoxville, TN 57 Copyright
Copyright2017
2012
 MaximoWorld

Stores Management –
Assure Reliability and
Availability of Spares

The RM Group, Inc.

Knoxville, TN 58 Copyright 2012
 MaximoWorld
What parts do you need to carry?
® Make a list of your critical equipment
® For each equipment, ask:
® What fails most often? Usually it’s belts, bearings,
seals, fuses, o-rings, gaskets, filters, etc.
® Make sure you have these in adequate quantity!

® Now ask - What doesn’t fail very often, but when it

does it’s really a serious problem?
® Now, make a business decision about the risk of
having or not having the spare, i.e., the
capital/carrying cost vs. the probability and
consequence of failure
® Balance the risk of loss, in maintenance
efficiency and production, vs. cost of capital
® Beware of counterfeit parts (10-15% are)
The RM Group, Inc.
Knoxville, TN 59 Copyright
Copyright2017
2012
 MaximoWorld

INSTALL and STARTUP–

with precision for long life

The RM Group, Inc.

Knoxville, TN 60 Copyright 2012
 MaximoWorld
Disciplined Installation, Startup and
Commissioning- Critical to Reliability
® Rohm & Haas reported that you’re 7-17 times more likely
to introduce defects during startup after a shutdown (than
normal operation)
® BP reported that incidents are 10 times more likely during
startup
® The chemical industry reported process safety incidents
are 5 times more likely during startup
® Companies without apprenticeship programs have 5X the
installation/startup defects as those with programs
® 92% of rotating machinery is reported to have defects at
startup that result in premature failure
Sources: 1) Reliability Magazine, February 2001, 2) Failure to Learn by Andrew Hopkins,’ 3) Doug Plucknette, GP Allied,
Charleston, SC; 6) Machinery Reliability Conference, Phoenix, April, 2001

The RM Group, Inc.

Knoxville, TN 61 Copyright
Copyright2017
2012
 MaximoWorld

OPERATE RELIABLY –
with care and precision,
and within process limits

The RM Group, Inc.

Knoxville, TN 62 Copyright 2012
 MaximoWorld
Reliability Based Operation

Reliability cannot be driven by the

maintenance organization. It must be
driven by the operating units, …and
led from the top.
Charles Bailey, VP of Operations
Eastman Chemicals (Retired)

The RM Group, Inc.

Knoxville, TN 63 Copyright
Copyright2017
2012
 MaximoWorld
Reliability Based Operation

® To expect maintenance to “own” reliability is

like expecting the mechanic at the garage to
“own” the reliability of our cars
® To help assure reliability, operators must
exercise “ownership”:
® TLC - tighten, lubricate, clean
® Condition monitoring - look, listen, feel, smell
® Basic care in operation - within its capability
® “Ownership” comes from engaging operators in
helping develop standards, practices, checklists,
measures, etc.
The RM Group, Inc.
Knoxville, TN 64 Copyright
Copyright2017
2012
 MaximoWorld
The Five Manufacturing Domains
World Class Manufacturing
Performance Levels
Strategic
e d- ms Domain
n L ea
t
c tio nal Proactive Organizational
d u tio
o c
Pr -fun Domain Learning-
s s L ed
Cr
o ce Industry
a n Planned Eliminate
e n Defects; Leadership
a int Domain
M Lowest Cost, Safest
Reactive Fix it before Competitive
Domain it breaks; Advantage
Least Stable
Fix it after No Surprises,
Regressive it breaks; Competitive Parity
ON
Domain Most
S I
Expensive V I
Don’t fix it
Overtime he
Meet Budget,
Heroes
T Source: W. Ledet
Staged Decay The Manufacturing Game;
Kingwood, TX
The RM Group, Inc.
Knoxville, TN 65 Copyright 2012
 MaximoWorld
MCP Consulting observed in working with the
Dept. of Trade and Industry (United Kingdom)

®40-50% of equipment breakdowns are caused

by poor operating practices
®30-40% of breakdowns are caused by either
poor equipment condition, or design
®10-30% of breakdowns are caused by poor
maintenance practices
®Ifyou’re concerned about equipment
breakdowns, where do you start?

The RM Group, Inc.

Knoxville, TN 66 Copyright
Copyright2017
2012
 MaximoWorldMost losses from ideal production (AU/OEE losses) are not
related to equipment downtime. Of those that are
equipment related, most are due to poor operation;
Only ~ 10% of production losses are typically
maintenance-controlled

Changeovers, rate/quality losses,

raw material, market demand,
production planning, etc

Sources: 1) Author’s experience with most all clients;

2) Similar findings reported by BASF-UK (Stevens), and
Borg-Warner-US (Cerny)
The RM Group, Inc.
Knoxville, TN 67 Copyright 2012
 MaximoWorld
For Example-
® Japanese Institute of Plant Mgmt (JIPM) reports:
® 70% of failures are preventable by operators
® 30% require intervention by technical specialists
® A large manufacturer did 23 RCM analyses,
resulting in 1,864 tasks to minimize failures:
® 1260 tasks (68%) were done by operators
® 570 (31%) were done by technicians
® 237 redesigns of process and/or equipment
® A large chemical company did FMEA analyses
at one of their plants, resulting in 475 tasks:
® 315 tasks (66%) were done by operators
® 160 tasks (34%) were done by maintenance &
reliability, engineering did some re-design (2%)

The RM Group, Inc.

Knoxville, TN 68 Copyright
Copyright2017
2012
 MaximoWorld
Production v. Maintenance –
Responsibility v. Control for Outcomes
Maintenance Responsibility vs. Control of Outcome Maintenance Mtce
Who controls the outcome? Responsibility? Control
100%
Outcome?

Issue Yes No Yes No

Mtce will meet weekly planned maintenance schedule X X

Production will operate equipment per design and take X X
care of it

Production will identify equipment problems between PM/PdM

using operator care and inspections X X

Mtce will provide clear formal work requests for work control X X X
systems; Production will do so as well

Equipment operates at design capability, first time, every time X X

Source: Royce Haws, Site Mgr., Alcoa Warrick Plant, SMRP 2013
The RM Group, Inc.
Knoxville, TN 69 Copyright
Copyright2017
2012
 MaximoWorld
Reliability Based Operation (cont.)
To address these issues, we must have:
® Production and maintenance partnership- good
communications, teamwork, common measures
® Consistency of operation across shifts
® Process Conformance and Capability
® Standard operating conditions/procedures
® Quality, calibrated instrumentation
® Quality raw material
® Equipment Reliability
® Good shift handover practices
® Operator care/PM, training and skills
The RM Group, Inc.
Knoxville, TN 70 Copyright
Copyright2017
2012
 MaximoWorld Correlation of Operator Care/PM and
Maintenance Costs (Avg data at each level for 200 plants surveyed)
16
Original Equipment Cost
R = 0.85
14
R2 = 0.73
Mtce Costs as a % of

12
10
8
6
4
2
0
0 1 2 3 4 5
Level of Operator PM/Care
Level 1 – None/Starting
Level 2 – Some PM checks
Level 3 – Regular PM checks Source: Reliability and Maintainability Center
Level 4 – Regular PM checks & some repairs Newsletter, University of TN, July 2009

The RM Group, Inc.

Knoxville, TN 71 Copyright 2012
 MaximoWorld

Operator Care, Ownership (cont.)

Take care of the place where you make your

living, so it will take care of you.

Mom

The RM Group, Inc.

Knoxville, TN 72 Copyright
Copyright2017
2012
 MaximoWorld

MAINTAIN –
For Reliability

The RM Group, Inc.

Knoxville, TN 73 Copyright 2012
 MaximoWorld
Maintenance Strategy for Reliability --
the integration of:

Reactive - Run-to-fail, emergency, breakdown, etc.

Preventive - Time based

Predictive - Condition based

Proactive - Root cause based

Maintenance: A reliability function not a repair function

BUT, as we’ve seen, Reliability is not just about maintenance

The RM Group, Inc.

Knoxville, TN 74 Copyright 2012
 MaximoWorld
Excess Defects Lead to Reactive Behaviors-
Typical Maintenance Practices
60
50
40
Percent

30 Time-based
20 Condition-based
10 Root Cause-based

0
Reactive Preventive Predictive Proactive

Source: Author’s surveys and The Reliability-based Maintenance Strategy: A Vision for Improving Industrial
Productivity, R. Moore, F. Pardue, A. Pride, J. Wilson, September 1993, CSI Industry Report.

The RM Group, Inc.

Knoxville, TN 75 Copyright 2012
 MaximoWorld
Eliminate and/or Manage Defects-
Benchmark Maintenance Practices
60
Planned and/or Scheduled
50 Condition-based

40
Percent

30
Time-based Root Cause-based
20
10
0
Reactive Preventive Predictive Proactive

Source: Author’s surveys and The Reliability-based Maintenance Strategy: A Vision for Improving Industrial
Productivity, R. Moore, F. Pardue, A. Pride, J. Wilson, September 1993, CSI Industry Report.

The RM Group, Inc.

Knoxville, TN 76 Copyright 2012
 MaximoWorld
AU/OEE vs. Reactive Maintenance
AU/OEE %
100

90 Slope= -0.24
80

70

60

50

40
10 20 30 40 50 60 70 80 90 100

Reactive Mtce %
The RM Group, Inc.
Knoxville, TN 77 Copyright 2012
 MaximoWorld
Preventive Maintenance
(intrusive time-based type) assumes:
PREVENTIVE
MAINTENANCE
Conditional Probability of Failure

WEAR-OUT
ZONE
LIFE

OPERATING AGE
Source: A. M. Smith, “Reliability-Centered Maintenance,” McGraw-Hill 1993, and
Reliability-Centered Maintenance, NTIS Document No. AD/A066-579, 1978.

The RM Group, Inc.

Knoxville, TN 78 Copyright 2012
 MaximoWorld
But, most failures are random –
(see the component histogram below)
How do we manage this?
350
Random Failure Pattern is Common;
300 84% of failures are caused by poor
operating and maintenance work practices,
Running Time

250 resulting in random failures (W. Ledet)

200
150
100
50
0
1 3 5 7 9 11 13 15 17 19 21 23 25 27 30

Source: Component Manufacturer Component Number

The RM Group, Inc.
Knoxville, TN 79 Copyright 2012
 MaximoWorld
Age Related Failure Curves
UAL Bromberg US Navy Plucknette
19681 19732 ’93 / ’013/4 20055
Conditional Probability of Failure

(United Airlines) (Surface/Sub) (Mfg Industry)

4% 3% 3 / 2% 3%

2% 1% 17 / 10% 3.5%

5% 4% 3 / 17% 6.5%
Sources: 1. S. Nowlan and H. Heap
Time 2. L. Pau
3. American Management Systems
4. T. Allen
5. D. Plucknette
The RM Group, Inc.
Knoxville, TN 80 Copyright 2012
 MaximoWorld
Random Failure Curves (cont)
UAL Bromberg US Navy Plucknette
19681 19732 ’93 / ’013/4 20055
Conditional Probability of Failure

(United Airlines) (Surface/Sub) (Mfg Industry)

7% 11% 6 / 9% 7%

14% 15% 42 / 56% 13%

68% 66% 29 / 6% 67%

Sources: 1. S. Nowlan and H. Heap
Time 2. L. Pau
3. American Management Systems
4. T. Allen
5. D. Plucknette
The RM Group, Inc.
Knoxville, TN 81 Copyright 2012
 MaximoWorld
Understand Degradation Process
(Avoid or Minimize the Consequence of Failure)

Onset of Failure Detect Potential Failure- Functional Failure-

System Meeting All System Not Meeting
Requirements All Requirements
(Resistance to Failure)

Pending Failure
Condition

Not Detected Broken- $$$

(PM- too much, too soon?) Maintenance/
Action Window
Performance
“PF Interval" Losses
(too little, too late)

Proactive* Predictive* Protective*

Stop/Delay Onset of Failure* Time

Sources: Ivara Corp, Hamilton, Ontario

*R. Baldridge, Cargill
The RM Group, Inc.
Knoxville, TN 82 Copyright 2012
 MaximoWorld
Maintenance Costs v. CM/PdM% (Correlation)
Database - minimum of 25 plants; minimum of 5 companies

20
Note: Work Management and Planning & Scheduling
2
MUST be excellent to act on findings of CM/PdM; and R = 0.96
Mtce Costs, %ARV

a proactive mindset is necessary for defect elimination

15

10

0
0 10 20 30 40 50 60 70 80 90 100
Percent Eqpt. on CM/PdM
Source: John Schultz, Allied Reliability, Inc.;
Charleston, SC
The RM Group, Inc.
Knoxville, TN 83 Copyright 2012
 MaximoWorld

Maintenance Costs v. % PM
20
R = 0.984
Mtce Costs, %ARV

2
R = 0.969
15

10

0
0 10 20 30 40 50 60 70 80 90 100
Percent PM Work
Source: John Schultz, Allied Reliability, Inc.;
The RM Group, Inc. Charleston, SC
Knoxville, TN 84 Copyright 2012
 MaximoWorld
Don’t Assume Vendor PM is correct:
Review of Vendor PM Recommendations–
964 Tasks Analyzed (Identified 96 new failure modes)

Use As Is
Delete
Extended Interval
New Task
Reduce Interval

Source: Steve Turner,

OMCS International, Australia

The RM Group, Inc.

Knoxville, TN 85 Copyright 2012
 MaximoWorld
Don’t assume your PM is correct either -
You could be wrong!
Consider one analysis of 20,000 PM Tasks

Use As Is
Delete
Replace w/PdM
Re-engineer-SFMEA
Xfer to Ops
Xfer to Lube
Source: John Schultz,
Allied Reliability, Inc.

ORNL reviewed 2400 PM’s:

38%- Delete; 41%- Use As Is;
12%- Modify; 9% New ;
The RM Group, Inc. Source: RMC @UT Knoxville
Knoxville, TN 86 Copyright 2012
 MaximoWorld Equipment Availability v. Maintenance
Costs for Various Strategies
- move to the higher reliability strategy for a given cost;
- cost cutting within a given strategy results in lower availability,
e.g., going from A to B
Strategy
Reliability
Focused
Mechanical Availability

A (Reactive + PM + PdM + Proactive)

B Condition
Based (PdM)

Fixed Interval (PM)

Reactive

Maintenance Cost
Source: R. Schuyler, E.I. DuPont
The RM Group, Inc.
Knoxville, TN 87 Copyright 2012
 MaximoWorld

Leadership,
Organizational Alignment,
Managing Cultural Change
and
Performance Measurement

The RM Group, Inc.

Knoxville, TN 88 Copyright
Copyright2017
2012
 MaximoWorld

Leadership
Leadership- the ability to inspire ordinary
people to consistently perform at an
extraordinary level

Leadership begs the question “How do I

get people to genuinely look forward to
coming to work every day?”

The RM Group, Inc.

Knoxville, TN 89 Copyright
Copyright2017
2012
 MaximoWorld
Peter Wicken’s
Leadership Model

P
r Autocratic Ascendant
o
c
e
s
s
e
Apathetic Anarchic
s

Source: The Ascendant Organization

By Peter Wickens
People
The RM Group, Inc.
Knoxville, TN 90 Copyright
Copyright2017
2012
 MaximoWorld
Level 5 Leadership
® Leader– anyone who has followers; Level 5 Leadership:
® Floats to the person best qualified to eliminate the
source of defects – nature of the work determines
who is in the lead position (Rank is not = Expertise)
® Comes from the top, and bottom; is found in a
relationship of leaders; and is the property of a
group, not an attribute of a particular individual
® Is willing and able to learn from others
® Types of Leadership:
® Executive leaders – provide vision and resources
® Operational leaders – provide time for workers to improve
® Network (shop floor) leaders – provide ideas for improvement
® Note - Managers are too far away from the work, BUT still try to control
what they don’t understand; this is driven by fear of: 1) loss of power; 2) loss
of position; and 3) loss of authority Source: Level 5 Leadership at Work,
Winston Ledet, et. al
The RM Group, Inc.
Knoxville, TN 91 Copyright
Copyright2017
2012
 MaximoWorld
Leadership – Common Characteristics
® Leadership requires vision, a greater sense of purpose,
watching the horizon, while grounded in reality
® Leaders empathize with people, treat them with dignity,
respect, and appreciation – they serve the people
® Leaders are trustworthy, true to their word & principles
® Leaders have a passion for excellence, set high work and
ethical standards, and create a disciplined, caring, and
proud environment
® Leaders are demanding, and supportive, simultaneously;
deferring to those best qualified for making decisions
® Leaders set the example, and have the courage to support
their basic values and principles
® As Hugh Blackwood, RADM, US Navy said:
Lead the people, manage the processes
The RM Group, Inc.
Knoxville, TN 92 Copyright
Copyright2017
2012
 MaximoWorld

Aligning the Organization

The RM Group, Inc.

Knoxville, TN 93 Copyright 2012
 MaximoWorld
Most Organizations are not Aligned
® According to Harris Interactive Research , only:
®37% of employees had a clear understanding of what the
organization was trying to achieve
® 20% were enthusiastic about organizational goals
® 20% saw a clear connection between their tasks and
organizational goals
® 15% felt the organization enabled them to achieve their
goals
® 15% felt they were in a high trust environment
® 10% felt their organization held people accountable
® 13% felt there was a high-trust, highly cooperative working
relationships with other groups or departments
® Consider the consequences of this if you were a coach and
your team’s athletes felt this way
The RM Group, Inc.
Knoxville, TN 94 Copyright
Copyright2017
2012
 MaximoWorld
Why Align the Organization?
® The process of organizing creates naturally
competing groups- shifts, plants, divisions, etc.
® As task inter-dependence increases, teamwork
and collaboration become increasingly critical for
organizational effectiveness. (e.g., production and
maintenance, shifts, marketing and manufacturing)
® Overcoming this need to compete requires the
creation of superordinate goals that take priority
over “group” interests:
® Constantly remind people to focus on the higher level goals
® Think at a systems level – don’t optimize at the suboptimal level, in
your little silo – ask ‘what effect will this have on the business?
® Develop shared measures between “competing” groups and
partnership agreements Source: Edgar Schein,
Organizational Psychology
The RM Group, Inc.
Knoxville, TN 95 Copyright
Copyright2017
2012
 MaximoWorld

Compensation and Rewards

® Compensation generally must be
internally equitable & externally competitive
® Salary tends to be a “hygienic factor” - you’ll
not produce any more for higher pay, but
you’ll leave because of poor pay
® Employees are generally driven by work
satisfaction, not pay:*
® Motivatorsare Autonomy, Mastery & Purpose
® Money is only a motivator for simple tasks
*Source: Daniel Pink , Author,
A Whole New Mind; Drive
The RM Group, Inc.
Knoxville, TN 96 Copyright
Copyright2017
2012
 MaximoWorld

Managing Cultural Change-

A Process Model

“Culture – what people do when the boss isn’t around.”

Ian Fyfe, BP (now w/Ineos)

The RM Group, Inc.

Knoxville, TN 97 Copyright
Copyright2017
2012
 MaximoWorld

The best way to change and sustain an

organizational culture is by first
changing management behavior

You cannot think your way into a new way

of acting. You must act your way into a
new way of thinking.

John Shook, Author

The RM Group, Inc.

Knoxville, TN 98 Copyright 2012
 MaximoWorld

There is nothing more difficult to take in hand,

more perilous to conduct, and more uncertain
of its success than to take the lead in the
introduction of a new order of things.

You will have enemies in those who have

prospered under the old order… but only
lukewarm support in those who will prosper
under the new order.
Machiavelli in The Prince

The RM Group, Inc.

Knoxville, TN 99 Copyright 2012
 MaximoWorld
Managing Cultural Change
Articulate a compelling reason for change- “positive tension”

Communicate your strategy, goals, and roles, repeatedly

Apply Leadership and Management Principles

Facilitate employee implementation of the change process

Measure the results- reinforce good behavior; challenge bad behavior

Stabilize the change/organization in the new order

Repeat these steps, over and over

The RM Group, Inc.
Knoxville, TN 100 Copyright 2012
 MaximoWorld
Facilitate Employee Implementation
® People don’t want to change?
® Ledet says people cannot accept change
unless three parts of the brain agree
® Intellectual
(reason),
® Emotional (benefit),
® Control (participation)

® Celebrate little successes, routinely, low key:

® Thanks, good job; newsletter; group
meeting acknowledgement, etc.
The RM Group, Inc.
Knoxville, TN 101 Copyright
Copyright2017
2012
 Facilitate Employee Implementation
® People do want to change,
® IF given compelling reasons for change
® IF there’s something in it for them:
® More secure future
® Better pay or rewards
® Less stress and hassle
® Less personal risk or fewer injuries
® IF they participate in creating the changes:
® Set up structured improvement time, e.g., small action teams
® Train and apply the appropriate tools for their needs
® Remove the obstacles from their success
® Routinely solicit, and act on, their ideas for improvement
® Show gratitude and appreciation for their contribution
® All three IF’s must be met - Align employee
personal interests with company interests
® “People own what they create” – help them create!
The RM Group, Inc.
Knoxville, TN 102 Copyright 2012
 MaximoWorld
Stabilize the Changes
® Update procedures/standards, training, measures,
audits
® Assure Management Stability - It’s very
difficult to have process stability with frequent
changes (2/3rds of plant & production mgrs are on the job < 3 years –
Idhammar IMC-12)
® Succession Planning is critical for new
managers
® If the change takes longer than executive or
organizational “attention span”, then it is
doomed to failure. Constancy of purpose is
essential

The RM Group, Inc.

Knoxville, TN 103 Copyright
Copyright2017
2012
 MaximoWorld

Performance Measurement Principles

Aligning Our Measurements from the

Executive Suite to the Shop Floor

The RM Group, Inc.

Knoxville, TN 104 Copyright
Copyright2017
2012
 MaximoWorld
Performance Measurement
Principles (cont.)
® Our measurements must:
® Expose our weaknesses (so we can improve them, e.g., OEE)
® Facilitate collaboration, not conflict, across
functional boundaries, particularly in groups with
high task inter-dependence, e.g., production &
maintenance, shifts, purchasing and stores, marketing
and manufacturing
Have the right balance of:
® Leading Indicators (the things you do), and
® Lagging Indicators (the results you get)

The RM Group, Inc.

Knoxville, TN 105 Copyright
Copyright2017
2012
 MaximoWorld
Performance Measurement
Principles (cont.)
® Leading indicators - shop floor oriented
® Lagging indicators - management oriented
® Management must provide the systems for all
measures for collecting, reporting, and action
® Be visible and current
® Cascade from the executive suite to shop floor,
being vertically supportive in both directions,
and facilitating collaboration across functions
Some examples are provided below

The RM Group, Inc.

Knoxville, TN 106 Copyright
Copyright2017
2012
 Performance Measures
MaximoWorld

Collaboration (cont.)
® To facilitate collaboration between:
® Production and maintenance, hold both accountable
for M&R costs, maintenance/PM schedule, and on-
time delivery!
® Stores and maintenance, hold both accountable for
inventory turns on parts, and stockout rate
® Projects and Operations, hold both accountable for
unit cost, and M&R costs; make the project engineer
the maintenance engineer for two years after startup
® Everyone is accountable for reliability and safety

The RM Group, Inc.

Knoxville, TN 107 Copyright
Copyright2017
2012
 Leading and Lagging
MaximoWorld

Performance Measures (cont.)

® Operators (Leading Indicators):
® Operator Care/PM conformance
® Process conformance/non-conformance
® Spills; loss of containment
® Disabled alarms
® Equipment downtime/delay times/life
® Housekeeping conformance
® First pass-first quality yield
® Other process-specific measures directly
influenced?

The RM Group, Inc.

Knoxville, TN 108 Copyright
Copyright2017
2012
 Leading and Lagging
MaximoWorld

Performance Measures (cont)

® Skilled Trades - Leading Indicators:
® % PM compliance to plan and schedule
® Mean time between repairs
® Seal life; no. of seals per month
® Bearing life; no. of bearings per month
® Lube compliance
® No. of leaks per month
® Other specific measures directly influenced?

The RM Group, Inc.

Knoxville, TN 109 Copyright
Copyright2017
2012
 Leading and Lagging
MaximoWorld

Performance Measures (cont)

® Executive Suite – Lagging Indicators:
® Return on Net Assets
® Market Share

® Sales Growth

® Earnings Growth

® Safety and Environmental Performance

The RM Group, Inc.

Knoxville, TN 110 Copyright
Copyright2017
2012
 Leading and Lagging
MaximoWorld

Performance Measures (cont)

® Plant Management – Lagging Indicators:
® Unit Cost of Production
® Asset Utilization or OEE
® On Time Delivery
® Safety and Environmental Performance
® Maintenance Cost as a % of Replacement Value
® Inventory Turns
® Return on Net Assets
® Reactive Maintenance Levels

The RM Group, Inc.

Knoxville, TN 111 Copyright
Copyright2017
2012
 MaximoWorld
Performance Measures
Summary (cont)
® Expose your weaknesses (OEE)
® Foster collaboration across functions
® Give more attention to leading indicators!
® Do the right things (leading indicators), and
® The right things will happen (lagging indicators)

® Display and keep measures current

® Align the organization

The RM Group, Inc.

Knoxville, TN 112 Copyright
Copyright2017
2012
 MaximoWorld

Strategy for Implementation

The RM Group, Inc.

Knoxville, TN 113 Copyright 2012
 MaximoWorld
Top Down/Bottom Up Strategy
TOP DOWN

Leadership – 1 1 Major Incidents

Goals, Strategy,
10 Minor Incidents
Resources 10
Work Orders /
650 0 Repairs
0 5 0
6
Defects
20, 0
Action Teams, 000 ,0 0
2 0
Employee
Engagement
Source: Ledet Enterprises
BOTTOM UP Inc., Manufacturing Game

The RM Group, Inc.

Knoxville, TN Copyright
Copyright2017
2012
 MaximoWorld
Strategy for Implementation
® Led from the top- executive sponsorship is
essential (simple permission is not sponsorship, or
leadership!)

® Production & Maintenance Partnership- Clear

goals and expectations must be set, and reasonably
achievable

® Shared KPI’s for reliability & business results must be in

the annual management appraisal and bonus system

® Shop floor engagement process, including a

support structure, cross functional teams, and structured
improvement time
Per a Gallup Survey (2013 & 16), ~30% are engaged; ~50% are not engaged; ~20% are actively dis-engaged.
The RM Group, Inc.
Knoxville, TN 115 Copyright
Copyright2017
2012
 MaximoWorld

Strategy for Implementation (cont.)

® Emphasis on training, and learning
(we spend millions each year maintaining and improving our
equipment, but very little maintaining and improving our
people and their skills)
® If your reliability strategy focuses on
maintenance, you will only do more
efficiently work that you should NOT be
doing at all!

The RM Group, Inc.

Knoxville, TN 116 Copyright
Copyright2017
2012
 MaximoWorld
Suppose you want reliability quickly;
Effect on maintenance costs (only)
Implementation Break-even
Bow-wave (10-30%) Point
(1-2 years)
Direct Cost of Maintenance

Invest

Planned PM Profit
(20-70%) Condition Based
(20-50%)
20-50%
Operator Maintenance Proactive/
Reactive
Maintenance Planned
(30-80%) 50-80%
Strive for Zero Downtime

Time 2-5 years

Source: Taking the Forties Field to 2010, R. L. Thompson, et al.,
BP Exploration, Presented at SPE international Offshore
European Conference, Aberdeen Scotland, Sept. 1993

The RM Group, Inc.

Knoxville, TN 117 Copyright
Copyright2017
2012
 MaximoWorld
Also, manage the bow-wave using “mini”
bow-waves (small improvement teams, longer time);
Most companies need some of both!!
Mini- Quick Wins
Bow-waves
Direct Cost of Maintenance

Profit

Time

The RM Group, Inc.

Knoxville, TN 118 Copyright
Copyright2017
2012
 MaximoWorld
Business Impact, K$ Engage the entire workforce

A1 – Big Opportunities: A2 > A1

500
Solve using teams applying
RCM, Six Sigma, RCA, KT, etc.
400

300 A2- Myriad of Little Opportunities:

A1 A2
Leadership engaging all the workforce,
200 individually or in very small teams,
applying simple fixes, common sense, 5 Whys
100

0
1 6 11 16 21 26 31 36 41 46
Opportunities (> 100)

Sources: 1) David Burns, Reliability Services Ltd. Melbourne, Australia; 2) Similar Results
Reported by Sergio Barreiro of Braskem’s 19 Brazilian Plants

The RM Group, Inc.

Knoxville, TN 119 Copyright 2012
 MaximoWorld
Engage the entire workforce (cont.)
® Sum of small problems exceeds the big ones;
small problems lead to bigger ones:
® Eliminating small day to day problems has a
much bigger impact on performance than
focusing on the major failures (Los Alamos National
Labs Study of manufacturing, reported in Spiral Up by Jane Flinder)

® Engaged employees are 3X more productive

than average (but only 30% are engaged) (ISR
Research study of 41 companies and 360,000 employees, reported in Spiral
Up by Jane Flinder); Gallup Survey, 2013)

® 70% of all improvement comes from

engaged employees (Source: Klaus Blache, Univ. of TN)
® Nothing changes until the shop floor does
things differently!
The RM Group, Inc.
Knoxville, TN 120 Copyright
Copyright2017
2012
 MaximoWorld

Employee engagement - critical

• Only ~30% are engaged;
• ~50% are dis-engaged;
• ~20% are actively disengaged

Source: Bob Kelleher, Employee Engagement Group, Boston, MA

The RM Group, Inc.

Knoxville, TN 121 Copyright 2012
 How do we get management
MaximoWorld

support for improvement?

® Show me the money:
® Measure AU/OEE and losses from ideal
® Link to those corporate measurements
which are most directly affected by
improved operating performance
® Determine the value of the improvement
® Determine the next steps for eliminating
the “defects” which result in higher cost
® Implement your plan

The RM Group, Inc.

Knoxville, TN 122 Copyright
Copyright2017
2012
 MaximoWorld Case Study: Total Opportunity Cost=
Maintenance Costs + Production Losses
(We might spend more on maintenance to reduce production losses)

60
Production Losses
50
Maintenance Costs
M$ 40

30

20

10

0
1st Year 2nd Year 3rd Year 4th Year

The RM Group, Inc.

Knoxville, TN 123 Copyright 2012
 MaximoWorld
Correlation of AU/OEE with Key Practices
No single practice is dominant

Management

Overhaul
Perf. Msmt.

Stores
Production
Teamwork

PdM

PAM
0.5

PM
0.4

Training
Correlation Coefficient

0.3

0.2

0.1

-0.1
We must be tenacious about engaging
-0.2
everyone in doing many things really well
-0.3
Reactive

-0.4

-0.5

The RM Group, Inc.

Knoxville, TN 124 Copyright 2012
 MaximoWorld All Best Practices are negatively
correlated with Reactive Maintenance
0.1

0
Correlation Coefficient

-0.1

Production
-0.2

Training
-0.3

Stores
PdM
Perf. Msmt.

PM
-0.4

-0.5

PAM

Overhaul
Management

Teamwork

-0.6

The RM Group, Inc.

Knoxville, TN 125 Copyright 2012
 MaximoWorld
Leadership: Management Support and Plant Culture
are Essential - Better Correlated with Best Practice

0.9
Teamwork

Perf Msmt
0.8

Overhaul
Correlation Coefficient

Production
0.7

PM
Training

PAM
0.6

Stores
PdM
0.5

0.4

0.3

0.2

0.1

-0.1

The RM Group, Inc.

Knoxville, TN 126 Copyright 2012
 MaximoWorld

No single practice is dominant

® We must do many things really well, working
as a team aligned to a common strategy and
set of goals
® We must have Ubuntu- a Zulu word which
characterizes a group with:
® dignity,
® mutual respect, and
® oneness of purpose

® Leaders foster an environment for “Ubuntu”

The RM Group, Inc.

Knoxville, TN 127 Copyright
Copyright2017
2012
 MaximoWorld

Let’s Summarize

The RM Group, Inc.

Knoxville, TN 128 Copyright
Copyright2017
2012
 MaximoWorld

Your system is perfectly designed

to give you the results
that you get.
W. Edwards Deming

The RM Group, Inc.

Knoxville, TN 129 Copyright
Copyright2017
2012
 MaximoWorld
How are you going to create a future
for your business?
(Prices trend down over time. We create a future by driving unit costs
down, through continuous improvement, or “little” innovation)

Market Price

“Big” Innovation-
Your Future

Profit = (Price – Cost) x Volume

C
A B
Unit Cost =
Cost “Little” Innovation
Drives costs down
Capacity
Market Share
The RM Group, Inc.
Knoxville, TN 130 Copyright 2012
 MaximoWorldMeasure and Manage All Losses from Ideal
100%
Scheduled Downtime Ideal
(minimize through better PM, PdM, planning)

Unscheduled Downtime
Maximum Sustainable Rate

“Heaven”
(minimize through better operating practices, defect elimination, PM, PdM)

Process Rate Losses

(minimize through better process control, consistency, standards)

Quality Losses

Potential Rate Utilization

(minimize through better standards, control, conformance)

Changeover/Transition Losses
(minimize through quicker changeovers, better production planning)

No Demand/Market Losses

Quality Utilization

Actual Availability
Asset Effectiveness
(lower costs, better alignment- marketing and operations)

Asset Utilization
AU/OEE is a measure of capital efficiency-

OEE/
WhyActual
spend moreProduction
capital? Find your hidden plant!
We must understand all losses from ideal and
make business decisions to reduce them

The RM Group, Inc.

Knoxville, TN 131 Copyright 2012
 MaximoWorld
Apply The Reliability Process-
Eliminate Defects!
Doing better Mtce will not
contribute much to Reliability

Install/
Design Buy Store Operate Maintain
Startup
(Life Cycle Cost) (With Discipline) (With Care)
(Cost of Ownership) (“Like a Store”) (With Precision)
Defects Defects Defects Defects Defects Defects

Root Causes
Rate Losses & Downtime
Unneeded Work - $$
Source: In Cooperation with
Injuries (& Env. Events)
Andrew Fraser,
Reliable Manufacturing Ltd. Asset Utilization Minimum unit cost
& of Production
Necessary Work
The RM Group, Inc.
Knoxville, TN 132 Copyright 2012
 MaximoWorld
Reliability and Process Stability are
Essential for Lean Manufacturing
(High variability and delay times necessitate more inventory and buffer stocks)
Production Flow Demand Flow

Delay Delay Delay

A Times
B Times
C Times
D

Raw
Mat’l
WIP WIP WIP Product

100 100 100 100

90 90 90 90
80 80 80 80
70 70 70 70
60 60 60 60
50 50 50 50
40 40 40 40
30 30 30 30
20 20 20 20
10 10 10 10
0 6 12 18 24 30 36 42 48 54 60 66 72 78 84 90 0 6 12 18 24 30 36 42 48 54 60 66 72 78 84 90 0 6 12 18 24 30 36 42 48 54 60 66 72 78 84 90 0 6 12 18 24 30 36 42 48 54 60 66 72 78 84 90

*Work In Process Daily Quality Production Levels

The RM Group, Inc.
Knoxville, TN 133 Copyright 2012
 MaximoWorld Remember Safety & Reliability
are highly correlated
(If zero injuries is a clear goal, then zero failures is a must)

120
Injury Rate- % of Base

Injury Rate
R = 0.80

OEE/AU- % of Base
135 OEE/AU R2 = 0.64
115
115
110
95
105
75
55 100

35 95

15 90
1
5
9
13
17
21
25
28
33
37
41
45
48
53
Month
Source: Large Industrial Manufacturer-A
The RM Group, Inc.
Knoxville, TN 134 Copyright 2012
 MaximoWorld

Your Policies Should Reflect This

® All injuries, and failures, are preventable

® No task is so urgent that it cannot be done safely, and reliably
® Management must provide a safe, and reliable workplace
® We are each responsible for preventing injuries, and failures
® Everyone is empowered to stop unsafe, & unreliable, behavior
A reliable plant is a safe and cost effective plant!
Reliability requires a comprehensive approach to
address ALL sources of defects!

The RM Group, Inc.

Knoxville, TN 135 Copyright 2012
 MaximoWorld
Remember – Cost Cutting Alone
Likely Results in Poorer Performance
(Cutting costs, A B, reduces availability)
Strategy
Reliability
Focused
Mechanical Availability

A (Reactive + PM + PdM + Proactive)

B Condition
Based

Fixed Interval

Reactive

Maintenance Cost
The RM Group, Inc. Source: R. Schuyler, E.I. DuPont
Knoxville, TN 136 Copyright 2012
 MaximoWorld
Avoid Infant Mortality Failures;
Do Lots of Condition Monitoring
UAL Bromberg US Navy Plucknette
19681 19732 ’93 / ’013/4 20055
Conditional Probability of Failure

(United Airlines) (Surface/Sub) (Mfg Industry)

7% 11% 6 / 9% 7%

14% 15% 42 / 56% 13%

68% 66% 29 / 6% 67%

Sources: 1. S. Nowlan and H. Heap
2. L. Pau
Time 3. American Management Systems
4. T. Allen
5. D. Plucknette
The RM Group, Inc.
Knoxville, TN 137 Copyright 2012
 MaximoWorld
Understand Degradation Process
(Avoid or Minimize the Consequence of Failure)

Onset of Failure Detect Potential Failure- Functional Failure-

System Meeting All System Not Meeting
Requirements All Requirements
(Resistance to Failure)

Pending Failure
Condition

Not Detected Broken- $$$

(PM- too much, too soon?) Maintenance/
Action Window
Performance
“PF Interval" Losses
(too little, too late)

Proactive* Predictive* Protective*

Stop/Delay Onset of Failure* Time
Sources: Ivara Corp, Hamilton, Ontario
*R. Baldridge, Cargill
The RM Group, Inc.
Knoxville, TN 138 Copyright 2012
 MaximoWorld
Manage the Bow Wave – Combination of
Large and Small Bow Waves
Implementation Break-even
Bow-wave Point
(1-2 years)
Direct Cost of Maintenance

Invest

Planned PM Profit
(20-70%) Condition Based
(20-50%)
20-50%
Operator Maintenance Proactive/
Reactive
Maintenance Planned
(30-80%) 50-80%
Strive for Zero Downtime

Time 2-5 years

Source: Taking the Forties Field to 2010, R. L. Thompson, et al.,
BP Exploration, Presented at SPE international Offshore
European Conference, Aberdeen Scotland, Sept. 1993

The RM Group, Inc.

Knoxville, TN 139 Copyright
Copyright2017
2012
 MaximoWorld

Summary (cont.)
® Alignment across the organization to
superordinate goals is essential
® Assure stability in the management
team
® Constancy of purpose is essential

® Get the basics right! As David Ormandy said:

“Do all the little things right so the big bad
things don’t happen”

The RM Group, Inc.

Knoxville, TN 140 Copyright
Copyright2017
2012
 MaximoWorld Long Term Thinking
Process Mapping
Apply the Tools Employees
The Toyota Way

Appropriately Tools

Organizational Enablers
& Readiness Kaizen – 5S, Standard Work, “Go and See”, 5 Whys,
Quick Changeover, Visual Workplace, Kaizen “Events”

Supply
TPM Principles Chain
Measure OEE and Manage Losses from Ideal
TLC/Operator Care/Consistency
Performance
Effective PM/PdM and Planning
Restore Equipment to Like New/Better
Training and Continuous Learning
Maintenance Prevention, in the Design

Six Sigma RCM

RCA
The RM Group, Inc.
Knoxville, TN 141 Copyright 2012
 MaximoWorld
Summary (cont.)
® Measure and display KPI’s: They must:
® Expose your weaknesses
® Facilitate collaboration and teamwork

® Balance leading and lagging indicators

® Be visible and kept current

® Recognize that no single factor

(except leadership) is dominant
® Be tenacious about doing everything
really well!!
The RM Group, Inc.
Knoxville, TN 142 Copyright
Copyright2017
2012
 MaximoWorld
Manage the Change Process
Articulate a compelling reason for change- “positive tension”

Communicate your strategy, goals, and roles, repeatedly

Apply Leadership and Management Principles

Facilitate employee implementation of the change process

Measure the results- reinforce good behavior; challenge bad behavior

Stabilize the change/organization in the new order

Repeat these steps, over and over

The RM Group, Inc.
Knoxville, TN 143 Copyright 2012
 MaximoWorld
Lead to World Class Manufacturing
World Class Manufacturing
Performance Levels
Strategic
e d- ms Domain
n L ea
t
c tio nal Proactive Organizational
d u tio
o c
Pr -fun Domain Learning-
s s L ed
Cr
o ce Industry
a n Planned Eliminate
e n Defects; Leadership
a int Domain
M Lowest Cost, Safest
Reactive Fix it before Competitive
Domain it breaks; Advantage
Least Stable
Fix it after No Surprises,
Regressive it breaks; Competitive Parity
ON
Domain Most
S I
Expensive V I
Don’t fix it
Overtime he
Meet Budget,
Heroes
T Source: W. Ledet
Staged Decay The Manufacturing Game;
Kingwood, TX
The RM Group, Inc.
Knoxville, TN 144 Copyright 2012
 MaximoWorld
Create a Virtuous Triangle

Marketing
Increase Capacity, Market Share,
Strategy
& Gross Profits, esp. in New Markets
Manage Mix/Complexity

Operating Manufacturing
Plan Strategy

Improve Reliability; Reduce Variability

The RM Group, Inc.

Knoxville, TN 145 Copyright
Copyright2017
2012
 MaximoWorld
Your strategy must:
® Led from the top- executive sponsorship is
essential (permission is not sponsorship, or leadership!)

® Production & Maintenance Partnership- Clear

goals and expectations must be set, and reasonably
achievable

® Shared KPI’s for reliability & business results must be in

the annual management appraisal and bonus system

® Shop floor engagement process, including a

support structure, cross functional teams, and structured
improvement time
Per a Gallup Survey (2013/16) and K. Blache (2015), 27-30% are engaged; 50-59% are not engaged; ~14-
20% are actively dis-engaged; Blache says active engagement improves probability of success by 7-fold.

The RM Group, Inc.

Knoxville, TN 146 Copyright
Copyright2017
2012
 MaximoWorld
Remember maintenance controls only
~ 10% of production losses

Changeovers, rate/quality losses,

raw material, market demand, Equipment Related
production planning, etc Losses-Maintenance
Equipment Related
Losses- Operation
Non Equipment
Related Losses

Sources: 1) Author’s experience with clients;

2) Similar findings reported by BASF-UK (Stevens), and
Borg-Warner-US (Cerny)
The RM Group, Inc.
Knoxville, TN 147 Copyright 2012
 MaximoWorld
And, so…

Reliability cannot be driven by the

maintenance organization. It must be
driven by the operating units, …and
led from the top.
Charles Bailey, VP of Operations
Eastman Chemicals (Retired)

The RM Group, Inc.

Knoxville, TN 148 Copyright
Copyright2017
2012
 MaximoWorld
Reliability - Essential for
Operational Excellence

Use reliability principles to create a

common strategy with
common superordinate goals for
organizational alignment, so you can:

Win in the Global Market!

The RM Group, Inc.
Knoxville, TN 149 Copyright
Copyright2017
2012
 MaximoWorld
Appendix A - Contact Details
Ron Moore
Managing Partner
The RM Group, Inc.
12024 Broadwood Drive
Knoxville, TN 37934
Tel/Fax: 865-675-7647
Email: RonsRMGp@aol.com

Ron Moore is the author of Making Common Sense Common Practice-

Models for Operational Excellence, 4th edition; of What Tool? When? – A
Management Guide for Selecting the Right Improvement Tools, 2nd edition,
of Where Do We Begin Our Improvement Program?, all from MRO-
Zone.com; of Our Transplant Journey: A Caregiver’s Story, and of
Business Fables & Foibles, both from Amazon.com; as well as over 60
journal articles.

The RM Group, Inc.

Knoxville, TN 150 Copyright
Copyright2017
2012